Tag Archives: Class and economics

Stop Stealing from Workers

Late last year I sat in the office of an Ohio County Prosecutor and provided her and the County Sherriff thick notebooks documenting a systematic theft of workers’ wages by a local construction contractor by means of misclassification under Ohio Prevailing Wage Law and systematic underpayment. The theft was compounded by the fact that company officials signed false verifications of compliance with state prevailing wage laws under penalty of perjury.   To add insult to injury, the job on which the wage theft took place was being paid for with tax dollars from that same county.

I asked the Prosecutor what would happen if a local construction contractor had brought evidence that one of their workers, perhaps a bookkeeper, had fraudulently written herself tens of thousands of dollars in checks from funds belonging to the company and then lied about the theft on government mandated reports signed under penalty of perjury. The Prosecutor, Sherriff, and their assistants and deputies all assured me that the culprit would be prosecuted to the fullest extent of the law.

I smiled, certain that  these law enforcement officials, ethical office holders, and civil servants would be as anxious to arrest and prosecute the owners of the construction company for stealing wages from their employees and lying about it under penalty of perjury as they would be to prosecute that bookkeeper.

I couldn’t have been more wrong.

They flatly refused to treat the wage theft as a criminal offense.  Instead, the company’s conduct was treated as a “mistake,” blamed on failure to understand the law.

Enforcement was left to the Ohio Department of Commerce, which could only require the company to pay back wages.  While more than $40,000 was ordered to be paid to the 9 employees and a 100 percent civil penalty assessed, the company owners were spared the life changing consequences of a criminal prosecution.

My experience was put into disturbing context by Kim Bobo’s new book, Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid—and What We Can Do about It (New York: The New Press, 2009) .  Bobo documents a wage theft crime wave across the United States. The victims range from illegal immigrants who fear deportation if they report violations to skilled construction workers who are forced to kick back parts of their paycheck on government projects, and includes childcare and home healthcare workers, sales clerks, and many others.  Bobo makes a compelling case that wage theft is far more pervasive than most of us understand or would like to admit.

Bobo draws her analysis primarily from her experience in running Interfaith Worker Justice Center in Chicago and cases handled by other worker centers throughout the country, and  a recent study of over 4000 low wage workers dramatically verified Bobo’s conclusions.  The study, “Broken Laws: Unprotected Workers,” makes stunning discoveries of the rampant nature of wage theft in America. Here are a few of the conclusions:

  • 26 % of respondents had been paid less than the minimum wage in the previous workweek.
  • 25% of the respondents had worked more than 40 hours in the previous week but a  whopping 76% of them were not paid overtime.
  • 70% of workers who arrived early or stayed late at their employer’s request were not paid for the extra time.
  • 69 % of workers entitled to meal breaks didn’t get them.

Wages are stolen from tens if not hundreds of thousands of American workers every day.  If employers were stealing from customers in such a systematic way, law enforcement at all levels would be forming task forces and putting thousands in jail.

Why should theft of wages from American workers be different?  Bobo suggests that most instances of wage theft can be traced to old-fashioned greed.  Greed is sometimes dressed up with rational sounding names like “pressure from competitors in low wage countries” or “innovative” compensation schemes.  But at the end of the day employers steal from those who work for them in order to make more money.

Bobo correctly points out that wage theft is also driven by the greed of consumers who demand low prices.   That demand leads some companies to indirectly encourage wage theft.    Bobo quotes the Congressional Testimony of MIT Professor Thomas Kochan, regarding the poster child for wage theft in America: “Wal-Mart executives have established corporate policies that are ethical and appear to conform to legal requirements. However Wal-Mart has also established financial and business objectives that managers find difficult to achieve without circumventing those rules.”  This is a scenario not unique to Wal-Mart. Despite ethical, legal policies, many companies repeatedly steal from their employees in order to reduce labor costs.

But perhaps the biggest factor is the lack of consequences.  Wage thieves are only rarely caught, and those who are face almost no legal, financial, or societal consequences.  Often the worst penalty for a wage theft is being forced to pay workers what they should have been paid to begin with and then only for the period of time allowed under the statute of limitations (often as little as two years).   Weak enforcement of relatively weak laws is as much to blame for the widespread practice of wage theft as employer or consumer greed.

Wage Theft in America proposes a variety of potential solutions to the problem.  Bobo’s proposals range from creating more worker centers to dramatically beefing up the enforcement capacity of Federal and State Wage and Hour Enforcement Agencies to policies that increase the number of workers represented by labor unions.  While her proposals would work, much of what she suggests would require legislation and appropriations that are politically unattainable even with Democratic control of all three branches of the federal government. (See the recent collapse of card check provision of the Employee Free Choice Act, if you have any doubt about this).

However, some less controversial and inexpensive strategies can help.   Congress needs to simplify economic protection laws and make it easier for employees to report wage theft offenses.  In particular, workers need reliable protection against retaliation for reporting violations.  Workers currently risk of termination or other workplace punishment if they report wage theft.

But ending wage theft may not require new laws.  Instead, government agencies should simply enforce existing regulations.  It won’t take many well-publicized arrests to persuade employers to stop cheating workers.

Making that happen will require political pressure.  Activists, religious organizations, and labor unions need to reignite the kind of moral outrage that brought about our current labor laws almost a century ago.  Rooting discussions of wage theft in religion can help.  Bobo argues that religious teachings from the Old Testament to the Quran demand that workers receive their fair day’s pay.  Because of this, religious organizations can be fertile ground for generating moral outrage against those who exploit the least among us.

Labor Unions and political activists should educate elected prosecutors and sheriffs about wage theft and how it undermines local citizens and the community.  And they should pressure law enforcement officials to do their jobs.  Local business communities should also support such efforts, since cheating competitors have an unfair advantage over ethical businesses that follow the law.  And since Bobo’s book demonstrates that companies with labor unions are less likely to commit wage fraud than their competitors, union leaders should engage their counterparts across the bargaining table to join in efforts to encourage more serious enforcement.

Unions and their lawyers can devote resources to investigating and documenting wage theft, providing overburdened state and federal officials the evidence they need to bring cases.  Efforts by construction unions to promote “fair contracting” have forced non-union competitors to comply with prevailing wage laws. Organized labor should embrace these efforts as tools to strengthen unionized competitors in every industry and for organizing more companies in the future.  Such efforts also show management and potential members the added value that having a union can bring to a company and its workers.

Wage Theft in America frames the debate as about not just the value of labor unions in the workplace, but also the value of workers themselves.  Reframing wage and hour violations as crime, reclaiming the moral high ground, and refusing to tolerate wage theft not only discourages cheating of workers but also reminds companies that operate ethically, as most do, that wage theft cuts into their bottom lines.  Such changes in the public debate would certainly have changed the outcome of my efforts to prosecute the cheating contractor in Ohio.

Marc Dann is a lawyer in Cleveland who represents labor unions and workers seeking fair wages and contracting practices and has been a community affiliate of the Center for Working-Class Studies for four years .

Taxing Only the Rich CAN Pay for Everything

It’s time for everybody who wants to say anything about “Obamacare” and taxes to tell the rest of us their income class.  I live in one of the 13.5 million households with a six-figure income between $100,000 and $200,000.  I could afford to give back the annual $2,500 tax cut George Bush gave me in 2001 and 2003, but our current president has pledged that he won’t allow my taxes to increase by a single dime.

I thought this was foolish and unfair when candidate Obama promised it, but now I understand why he put himself in this trick box.  My income class serves as a sort of buffer zone to protect the working class from being attacked with taxes on their health insurance and soda pop.  The only way to ever have a discussion about what to do about our rapidly growing income inequality is to leave us, the vast majority of middle-class professionals, harmless.

In the first week of August, the national punditry declared with something like unanimity that, as the New York Times headlined, “Obama’s Pledge to Tax Only the Rich Can’t Pay for Everything, Analysts Say.”  Unanimity among cable news pundits is bad for business, so their agreement on this is particularly striking.  And this leads me to ask: Do the pundits and the “analysts” they cite really not know the numbers or are they consciously or semi-consciously trying to avoid an increase in their taxes?  It would help to know whether they are “rich” by President Obama’s standard – above $200,000 for individuals, $250,000 for families.

One of the few national pundits who routinely admits he’s “a rich guy” is Bill O’Reilly of Fox News, but with a $10 million-a-year salary (not counting his book sales and speaking fees), he’s more like the super-rich – as is Charlie Gibson of ABC News.  I’m wondering what Bill Bennett, Campbell Brown, David Gergen, Gloria Borger, and all the other talking heads who play such an important role in shaping national debates make these days.

And do they have assistants who actually check out what their “analysts” tell them?  I don’t.  I’m a humanities professor who cannot now and never has been able to do algebra, but I use the Statistical Abstract of the United States in teaching numeracy in undergraduate critical-thinking courses.  Table 470 provides interesting information on Adjusted Gross Income (AGI) and taxes by income-class.  An Internal Revenue Service spreadsheet gives more detailed AGI information on taxpayers in 2007.  AGI is income after certain tax deductions(Wikipedia nicely explains what is and is not included). Using these sources, here’s what I learned in about two hours earlier this week.

Of the 143 million U.S. taxpayers (individuals and households), about 4.5 million have AGIs of more than $200,000 a year.  Though only 3% of all taxpayers, this group claims 32% of all AGI – or $2.8 trillion.  They already pay about $600 billion in federal income tax, or about 22% of their incomes.  If this group paid a graduated average of 35% instead, that would add $400 billion to federal revenues every year.  This would leave them with about $1.8 trillion after taxes, which is roughly what two-thirds of all taxpayers (with AGIs of less than $50,000) have before they pay taxes.

All that is being asked of the rich so far is an increase of $97 billion a year — $43 billion by reverting to the pre-Bush top two marginal tax rates, and $54 billion in surtaxes on incomes over $280,000 to pay for health care.  Both these tax increases directly redistribute income from the rich to the working class.  The $43 billion a year is slated to permanently pay for Obama’s Making-Work-Pay tax credit (introduced but not paid for in the two-year stimulus package).  The $54 billion is mostly slated to help low-income workers pay for health insurance.

More will be needed for long-term government investment in green jobs, infrastructure, and education, all of which (along with health care reform) should lead to stronger, more sustained economic growth, which will do more than any other single thing to bring down government deficits and to increase working-class (and middle-class) incomes.  Taxing the rich can provide all that’s needed for even the most ambitious programs proposed so far. The rich are not an inexhaustible source of government tax revenue, but they have a lot to give before the “middle class” will need to be tapped.

That’s the theory, and it deserves to be debated, but it’s hard to believe that the pundits don’t know that there has been a radical redistribution of income from the working class to the rich over the past quarter century.  So in the interests of “transparency” (a middle-class professional term for fessing up), all commentary on paying for Obamacare should include full disclosure of whether the commentator is rich – possibly as a tagline at the bottom of the screen.

What’s more, since the proposed surtax on the rich is especially easy to figure, rich commentators should tell us how much the surtax will cost them.  For example, as currently proposed, Bill O’Reilly will pay an additional $500,000 in income taxes and Charlie Gibson, an extra $380,000.  It would be good to know how lesser pundits would fare, too, as this might help explain why they keep suggesting that President Obama must break his promise not to increase middle-class taxes.

The President won’t break that promise because he is in a trick box of his own crafting.  And there are many analysts out there – all of whom can do algebra and most of whom make less than $200,000 — who would be glad to help reporters and pundits dig into the facts on income and taxes, if they should ever want to.

Jack Metzgar

Obama’s DeLorean?

I know I’ve used the déjà vu/time machine analogy before,  but if Michael J. Fox can make three Back to the Future movies, then I can make a sequel, too.  Every time I read about how the Democrats first pandered to and are now ignoring the needs of the working class, I feel like I just landed back in 1993 after taking a wild ride in Doc Brown’s beat up DeLorean.

Back then, the Clinton administration lost control of the health care reform debate, abandoned its number one promise to labor, and screwed a whole bunch of Mahoning Valley residents who worked for Packard Electric. Clinton’s approval numbers tanked, and Republicans, once thought to be an endangered species, regained power.

Sound eerily familiar?  Today, the Obama administration has lost control of the health care reform debate, abandoned its number one promise to labor, and apparently screwed a whole bunch of Valley residents who used to work for Packard Electric.  The president’s once-phenomenal approval ratings are tanking, and Republicans, pronounced dead less than eight months ago, have risen Lazarus-like from their crypt.

Let’s take a closer look at what’s going on just to make sure we aren’t really caught in a time warp.  On health care, Mr. Obama is being beaten into the ground by the same right-wing liars who crushed reform in ‘93: Pat Buchanan, Newt Gingrich, Rush Limbaugh, the insurance industry, and the AMA.

These guys, along with some new crazies, are recycling the lies they told 16 years ago.  They say we’re headed toward the kind of socialized medicine that (they claim) doesn’t work in Canada, that bureaucrats will interfere with the doctor-patient relationship, that care will be rationed, and that a government worker sitting in a cubicle will decide whether your elderly mother lives or dies.

The fact that none of this is true doesn’t seem to matter any more today than it did in the Clinton era.  Like then, the liars are using paid advertising and talk radio to propagate their fables.  And, like then, people are listening.

The President has responded by conducting town hall meetings where he spends most of his time refuting tall tales.  But that won’t get the job done.  It’s time for the president and the Democratic Party to spend some of the millions in their campaign accounts to mount a counterattack.

The TV and radio ads will be easy to make—just tell people the truth.  Tell them your plan won’t require them to abandon their coverage or their doctor, that bureaucrats working for the profit-hungry insurance industry are already making decisions about their health care, that care’s already rationed, especially if you’re one of the tens of millions of Americans who are under or uninsured, and  that we already have socialized medicine.  It’s called Medicare, and it’s kept untold millions of elderly mothers alive since 1965.

Tell the American people all that and do it right now, before members of Congress head home and are verbally assaulted by constituents who haven’t heard the truth.  If you don’t, the reps and senators will return to Washington scared sh—well, we all know how scared they’ll be—and health care reform will be dead.

Now let’s talk about unions.  In another Back to the Future moment, Mr. Obama, like Clinton in ’93, recently abandoned his promise to fight for the enactment of organized labor’s number one priority.  Sixteen years ago the issue was scabs.  During his campaign Clinton had promised to do everything possible to ban the use of permanent replacement workers during labor disputes.  He didn’t.

In 2008, labor’s priority was passage of the Employee Freedom of Choice Act (EFCA) a rewrite of the National Labor Relations Act that would, among other provisions, make card check recognition the law of the land.  This would prevent employers from engaging in the coercion and intimidation that have crippled countless organizing drives over the past two decades.  Obama repeatedly promised to do whatever was necessary to get it done:

We need to stand up to the business lobby that’s been getting their friends in Congress and in the White House to block card check. That’s why I was one of the leaders fighting to pass the Employee Free Choice Act. That’s why I’m fighting for it in the Senate. And that’s why we’ll make it the law of the land when I’m President.

But they haven’t.  In yet another Democratic betrayal of the working class, the card check provision was stripped from the EFCA before it came to a vote in either house.  The president expended zero political capital on the issue.

Which brings us to Delphi-Packard.  At one time approximately 14,000 people worked in the company’s plants in Mahoning and Trumbull counties.  Then Clinton won the NAFTA battle and thousands of Valley residents saw their good-paying jobs head to Mexico.  Thousands of employees agreed to retire early in exchange for enhanced pensions and guaranteed health care benefits.

Guess what happened next.  First, Delphi-Packard went bankrupt.  Then salaried retirees lost their health care.  Then the company dumped its pension obligations on the Pension Benefit Guaranty Corporation.  As a result salaried employees will lose the enhanced benefits they were promised, as will thousands of retired hourly employees who had the misfortune of belonging to the IUE, including  most of the company’s workers in the Mahoning Valley.  They will also lose health care benefits.

Ironically, one group of hourly retirees will not face similar cuts: those from the UAW.  In a move designed to facilitate GM’s emergence from bankruptcy by gaining the union’s support for a concession package, Packard workers who were UAW members of  won’t lose a penny of their pensions or their health care benefits.  The IUE asked Mr. Obama’s auto task force to order GM to provide its members with the same supplemental pension and benefit package given to the UAW.  That request was summarily rejected.

It should come as little or no surprise then, that when retirees gathered to protest their fate, many carried signs castigating Obama and told reporters that they would do everything they could to deny him a second term.  Of course, these same workers had made a similar threat about Clinton in ’93.  Maybe Rahm Emanuel and the crew in the West Wing are confident history will repeat itself?  After all, they know that Democratic leaders keep getting away with disrespecting working families and their unions.  And maybe that’s why they were so willing to pit one union against another in order to protect GM?.

By the way, Mr. Obama’s approval numbers: 64% in February, 54% in July.  Was that whoosh I just heard the sound of the air rushing out of his presidency or the whirr of an old DeLorean flying by?

Leo Jennings

Religion, Workers, and the Economy: Caritas in Veritate

Since the publication of Rerum Novarum in 1891, Catholic social teachings have provided moral and ethical guideposts for economic behavior.  Of particular importance, have been the Papal Encyclicals on the economy that have sought to protect the working class and their institutions in the face of unfettered capitalism.   In Pope Benedict XVI’s recent encyclical, Caritas in Veritate, the Church goes a step further by providing a critical analysis of neoliberal economic thought and the problems of globalization while reiterating the need for basic protections for workers and unions.

Caritas in Veritate calls us to avoid the pursuit of narrow, short-term economic interests and practice genuine love founded on truth, beginning with justice and pursuing the common good in our economic choices.  The pontiff points to “badly managed and largely speculative financial dealing, large-scale migration of peoples . . . [and] the unregulated exploitation of the earth’s resources.” Benedict writes: “the economy needs ethics in order to function correctly — not any ethics whatsoever, but an ethics which is people-centered.”

Benedict laments that “The global market has stimulated .  .  .  a search for areas in which to outsource production at low cost with a view to reducing the prices of many goods . . . Consequently, the market has prompted new forms of competition between States . . . by means of a variety of instruments, including . . . deregulation of the labour market.”  This has, in effect, “led to a downsizing of social security systems . . . with consequent grave danger for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social State.”

The pope writes explicitly that justice abhors great disparities in wealth and that societies need “to prioritize the goal of access to steady employment for everyone.”   Employment, however, needs to be “decent work.”  Benedict writes that  such work  “expresses the essential dignity of every man and woman; work that is freely chosen, effectively associating workers, both men and women, with the development of their community; work that enables the worker to be respected and free from any form of discrimination; work that makes it possible for families to meet their needs and provide schooling for their children, without the children themselves being forced into labour; work that permits the workers to organize themselves freely, and to make their voices heard; work that leaves enough room for rediscovering one’s roots at a personal, familial and spiritual level; work that guarantees those who have retired a decent standard of living.”

The encyclical notes that the current market/state logics have constrained union work: “budgetary policies, with cuts in social spending  . . . can leave citizens powerless in the face of old and new risks; such powerlessness is increased by the lack of effective protection on the part of . . .  trade union organizations (who) experience greater difficulty in carrying out their task of representing the interests of workers, partly because Governments . . . limit the freedom or the negotiating capacity of labour unions. Hence traditional networks of solidarity have more and more obstacles to overcome.”

He affirms the moral importance of unions as an organized voice for the working class.  Benedict XVI challenges workers and unions, however, to change the way they “do business” and model ethical agency.  The message proclaims that the world desires a new way of thinking and working which goes beyond minor regulatory reform.  Solidarity, justice, and the common good must replace the worn out binary logics of markets and States.

Further, labor unions must be more than economic self-interested units caught in the logic of exchange. Benedict dares unions to be in solidarity with workers in developing countries.  This role includes advocating for appropriate foreign aid and re-thinking positions on immigration and migrant workers.  Benedict exhorts trade unions to re-evaluate their political activities as a quasi-interest group and focus more on “defending . . . exploited and unrepresented workers, whose woeful condition is often ignored by the distracted eye of society.”

This encyclical renews the Church’s commitment to labor unions and worker associations.  These working-class organizations, however, do not get off the hook from their responsibility for the current crisis in thinking and action.  Worker associations must be engaged in the work of “caritas,” which inherently includes a passion for justice that advances the common good.  Put differently, labor organizations must be more involved in social justice unionism rather than just economic self-interest.

Labor associations provide key assets for working people to be heard, respected, and engaged in this new world order of post-financial/industrial capitalism at a critical moment in its trajectory.  The current global crisis cries out for a radical new vision.  Working people, the very agents of creating wealth and community, like managers and financiers, are called to choose a lifestyle that is wholly ethical and life-giving.  This moral way of living is not just about individual choices.  Organizational structures and systems must be integrated moral agents.  For unions, I wonder if it is time to let the business-unionism model wither away and allow working-class people to re-invent their associations based on “caritas”?

What is the essence of this “caritas?”  “Solidarity is clearly a specific and profound form of economic democracy,” the pope writes. “Solidarity is first and foremost a sense of responsibility on the part of everyone with regard to everyone.”  Solidarity is both the end and the means.  We are gifts to each other.  Working-class persons and labor unions must be leaders in weaving “networks of charity.”  Labor movements have to be models of a “caritas” called justice.  The world can’t wait much longer.

Brian R. Corbin

Brian R. Corbin is Executive Director of Catholic Charities Services & Health Affairs, Diocese of Youngstown, and a community affiliate of the YSU Center for Working-Class Studies   His blog can be followed at brianrcorbin.com.

Budget Cuts Threaten the Working Class

Last fall, I drove to Columbus for a one-day unconference with library technologists. We each took turns writing topics on the board about which we wanted to learn or to share. The attendees separated into small groups according to interests: open-source content management systems, blogging and social media (Facebook, Twitter, etc.).

It turns out that librarians are passionate about technology, and for good reason. Since card catalogs gave way to searchable online directories, everything about information has become digitized. Government has likewise been turning everything over to the Internet: any and all forms that can be filled out and submitted digitally must be submitted online. From unemployment to workers’ compensation, the process begins with and is fed by virtual forms.

The connection of all this to working-class issues may not be immediately apparent, but think for a moment about the effect of these changes on access to information and to basic services. In order to apply for unemployment benefits, one completes online forms. Not only does this require some level of computer savvy, it also requires Internet access. How many unemployed working-class families can afford Internet access?

The Pew Internet & American Life Project reports that of the 25% of adults who do not use the Internet at home: 13% can’t get access, 7% can’t afford it and 4% don’t have a computer. Pew Internet further cites 43% of Americans in households earning less than $30,000 per year and 23% of Americans in households earning less than $50,000 per year as non-Internet users at home. The most obvious points of access for these and other users are public libraries.

I spoke with Diane Vicarel, Digital Services Manager at the Public Library of Youngstown and Mahoning County. I asked about the popularity of public Internet access and whether she could provide any statistics on how much their computers were used throughout the day. She wasn’t sure such statistics existed, but that’s only because the computers are always in use from when the doors are opened in the morning until the last user leaves. She said the sight of lines of people outside waiting to use the computers is common.

The library also provides a number of databases to support adult education, resources for job searches, audio-visual assets and links to additional information across the Web. Of course, libraries still serve the fundamental purpose for which they began: massive catalogs of books on every topic, for recreation or reference.

Ohio has made news in the last month by proposing to slash hundreds of millions of dollars in library funding from its annual budget. Funding for Ohio’s libraries is determined by a formula that ties a percentage of the state’s general revenues. Revenues have plunged in the current economy, leaving libraries wondering what lies ahead. Compared with 2008 funding levels, 20% of state revenue has been lost since January of 2009. Another 30% cut has been proposed on top of that for this year, with further expected cuts of 47% in 2010 and 45% in 2011. As state revenues fall nationwide, Ohio is certainly not the only state whose libraries are facing crippling cuts at a critical time.

This double whammy is the sad story facing American workers today. Economic decline means lost jobs and fewer state dollars to support libraries where the unemployed can both get temporary assistance through unemployment benefits and access to tools to hopefully get another job.

The success of the stimulus package, as has been discussed several times on this blog, will be determined in part by the foresight to continue providing a safety net of tools and services for those who have fallen. The strain our society will face if those with temporary financial setbacks lack the resources necessary to get back on a road to recovery will be far greater than if we identify and continue to financially support those resources, such as libraries, that are needed as a critical link between workers and the government.

-Tyler Clark

Tyler Clark is a technology and Web marketing consultant who writes about Youngstown .

Taxing the Rich

We’ve done a lot of hang-wringing on this site about the difficulties of defining the working class.  But as has been pointed out, there’s no clear, agreed-upon definition of “middle class” either, and though there is a clear official definition of “the poor,” it is pretty much a joke (e.g., a family of three earning $17,000 a year does not qualify as “poor”).

Fortunately, however, we now have a semi-official working definition of “the rich.”  During last year’s election campaign, President Obama said he would not increase taxes on the middle class, but only on the rich, which he defined as $200,000 in annual income for individuals and $250,000 for households, or the top 5%.

Though candidate Obama said he’d roll back the Bush tax cuts for the rich, he didn’t specify what other taxes on them he might favor.  But he laid out an ambitious (and  therefore expensive) policy agenda and vowed to pay for it without raising taxes on “the middle class.”   He didn’t demonize “the rich,” or bash them for being greedy and selfish, but he did make clear who he thought should pay for universal health care, a green jobs energy program, tax credits for the working poor, and massive long-term investments in education and physical infrastructure.

The rich, so-defined and so clearly warned, voted 52% to 46% for Obama.  That the rich would vote to tax themselves is not a surprise to the authors of Class War? What Americans Really Think About Economic Inequality.   Their recent survey found that “a majority of the affluent . . . believe that the government should ‘redistribute wealth by heavy taxes on the rich.’” (p. 91) In fact, majorities of Americans in all income groups “agree that economic inequality has widened, that this is worrisome, and that the government should respond.” (p. 14)

Given these facts, it’s a bit of a mystery why suggestions to tax the rich are so widely greeted with outcries against “class warfare.”  It’s also a mystery why Congress and the punditry are currently wringing their hands about how to pay for Obama’s plan for achieving universal health insurance, estimated to cost somewhere between $1 trillion and $1.6 trillion over ten years.  That’s about $100 billion to $160 billion a year.

The redoubtable Citizens for Tax Justice (CTJ) last month released a new menu of possible tax increases, titled Progressive Revenue Options to Fund Health Care Reform.  It has 14 options, and CTJ advocates for six of them.  My favorites are to tax capital gains and dividends the same as “earned income” (aka wages and salaries) and to have these forms of “unearned income” (that’s what they call it!) pay the same Medicare tax that is automatically deducted from the paychecks of all employees.  These two options would produce $113 billion a year in new revenue.

Having income that is “unearned” taxed the same as income that is “earned” seems like basic fairness to me.  But it would increase taxes (slightly) on some non-rich folks and, therefore, CTJ comes up with a more complicated set of tax increases that would fall only on President Obama’s rich and would produce $107 billion in new revenue.

This would produce enough new revenue to fund the Obama version of universal health care if (and only if) legislation includes “the public option” and other money-savers in the Obama plan. But it is not enough to do all the other things Obama and the Congressional Democrats have promised to do.  Fortunately, the Institute for Policy Studies’ (IPS) recent report Reversing the Great Tax Shift: Seven Steps to Finance Our Economic Recovery Fairly offers additional revenue-raisers not included in CTJ’s 14 options:

  • A financial transactions tax of 0.25% on all stock trades = $100 billion
  • Eliminate overseas tax havens = $100 billion
  • A 50% income tax rate for persons earning over $2 million a year = $60 billion
  • A progressive estate tax = $40 billion
  • Eliminate subsidies for executive compensation = $18 billion

IPS is less scrupulous than CTJ in trying to keep all tax increases from falling on anybody below $200,000, but the overwhelming majority of IPS’s seven-step program would fall only on the rich.

To enact all of these possible tax increases would amount to more than $400 billion taken from the rich for clearly stated public purposes.  Some think this would be unfair to the rich, others think it would stifle the economy, and we would be sure to hear lots of denunciations of class warfare.  But in context, it really isn’t that much for the rich – they’d all still be rich.

An enormous amount of income and wealth has been concentrated in the top 5%, and especially in the top 1%, in the past quarter century.  Total personal income in the U.S. is about $12 trillion, and the top 5% now get about $4.3 trillion of that.  If an additional $400 billion were taken from them in taxes to pay for health care, education, energy self-sufficiency, and other vital public necessities, this relatively small group of people would still have about one-third of all income and even more of all wealth.  And they’d have a helluva lot better society to live in.

Jack Metzgar

The Future of the Working Class, Part II

Graduation season has drawn to a close, and given the economy, both high school and college graduates now face uncertain futures.  For generations, American parents expected their children to achieve greater economic and social status than they did.  Surveys show that few families believe that this is likely any more.  After decades of widespread belief in upward mobility, Americans no longer see a perpetually brighter future.

Our economic pessimism is well-earned, and that has significant implications for young adults from working-class and middle-income blue-collar families.   The old model of following a parent into the steel mill or auto plant has been a doubtful dream for a couple of decades now, and the current economic crisis makes it even less realistic.  As Bob Herbert pointed out in a recent op-ed, workers under 30 have been the hardest hit in this recession.  So what will become of the rising generation of working-class kids?  What does their future look like?

In Friday’s New York Times, Steven Greenhouse highlighted one option:  college.  Perhaps ironically, community college enrollments are swelling, much as they did during the 1970s, when the higher education system significantly expanded the community college option in part as a way of keeping young adults out of an overcrowded workforce for a few more years.  Of course, today most students remain in the workforce while going to school, often working 30 or more hours a week at low-wage jobs to scrape up enough for tuition.  While college increases an individual’s lifetime earning potential, it doesn’t in itself ensure a strong economic future.  Among other things, young people seeking educational escape routes too often choose for-profit schools that offer training for jobs that don’t exist.  Others take on debt that will undermine their economic stability for years after graduation.  Meanwhile, as I noted a few months ago, most of the fastest-growing occupations don’t require a college degree, and many recent college graduates are struggling to find work.

As Greenhouse notes, some recent high school graduates are choosing college because they don’t like the jobs that are available.  They simply don’t want to work for $7.50 an hour, and who can blame them?   And even those jobs are becoming more scarce.  That’s why many young adults are entering the informal economy, off-the-books jobs that include legal work that is not formally reported, such as mowing lawns or caring for children, as well as illegal work such as prostitution.  According to recent reports, the informal economy is growing as the formal economy shrinks.  Some off-the-books jobs might pay more than $7.50 an hour, but they also bring the potential for exploitation, poor working conditions, and intermittent employment.   Not exactly the foundation to build a comfortable life.

All of this occurs against a backdrop of what is likely to be a very slow economic recovery and at a time in their lives when young adults should be developing the work experience upon which to build a secure future.  As Louis Uchitelle reported last week, even in this bad economy, some employers are struggling to fill jobs, because they want experienced workers.  Tomorrow’s experienced workers can only come from the ranks of today’s beginners, but with so few good entry-level jobs open now, how will we develop the kind of workforce we will need in another decade?  As Uchitelle’s article suggests, college alone won’t do it.  Nor will low-wage jobs in the formal workforce or off-the-books work in the informal economy.

Securing the future for the working class, much less preserving the promise of upward mobility that has been so central to American culture, requires big thinking and integrated policy.  We must connect educational policies (and funding) with policies related to business, employment, wages, health care, and pensions.  We must begin to think about the long-term consequences of policies directed at solving current problems.  We must also demand that policy makers look beyond business and even beyond the middle class to consider the opportunities and conditions of the working class.

Sherry Linkon